US Regulators Close Silicon Valley Bank in One of the Largest Bank Failures Since Washington Mutual

March 10, 2023 Bitcoin.com

Elizabeth Warren Blames ‘Crypto Risk’ for Silvergate Bank’s Liquidation, Critics Dismiss Senator’s Claims as ‘Terribly Misinformed’

March 9, 2023 Bitcoin.com

Bitcoin price derivatives look a bit overheated, but data suggests bears are outnumbered

February 16, 2023 Coin Telegraph

Bullish BTC traders are using excessive leverage, but bears’ reluctance to fight back could extend the current Bitcoin price rally.

Bitcoin (BTC) price rallied over 12% on Feb. 15, marking the highest daily close in more than six months. Curiously, the movement happened while gold reached a 40-day low at $1,826, indicating some potential shift in investors' risk assessment for cryptocurrencies.

A stronger than expected U.S. inflation report on Feb. 14 presented 5.6% growth year-over-year, followed by data showing resilient consumer demand caused traders to rethink Bitcoin's scarcity value. U.S. retail sales increased by 3% in January versus the previous month — the highest gain in almost two years.

On-chain data indicates that the recent gains can be traced back to a mysterious institutional investor that started buying on Feb. 10. According to Lookonchain's data, nearly $1.6 billion in funds have flowed into the crypto market between Feb. 10 and Feb. 15. The analysis showed that three notable USD Coin (USD) wallets sent out funds to various exchanges around the same time.

More importantly, news emerged that the Binance exchange is preparing to face penalties and settle eventual outstanding regulatory and law-enforcement investigations in the U.S., according to a Feb. 15 Wall Street Journal report. The exchange's chief strategy officer, Patrick Hillmann, added that Binance was "highly confident and feeling really good about where those discussions are going."

Let's look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.

Bitcoin margined longs entered the “FOMO” range

Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only bet against (short) the cryptocurrency. Unlike futures contracts, the balance between margin longs and shorts isn't always matched.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders' margin lending ratio increased between Jan. 13 and Jan. 15, signaling that professional traders added leverage long positions as Bitcoin price broke above the $23,500 resistance.

One might argue that the demand for borrowing stablecoins for bullish positioning is excessive as a stablecoin/BTC margin lending ratio above 30 is unusual. However, traders tend to deposit more collateral after a few days or weeks, causing the indicator to exit the FOMO level.

Options traders remain skeptical of a sustained rally

Traders should also analyze options markets to understand whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

Notice that the 25% delta skew has been neutral for the past two weeks, signaling equal pricing for bullish and bearish strategies. This reading is highly unusual considering Bitcoin gained 16.2% from Jan. 13 to Jan. 16 and typically, one would expect excessive bullishness causing the skew to move below negative 10.

One thing is for sure, the lack of bearish sentiment is present in futures and options markets. Still, there is some concerning data on excessive margin demand for leverage buying, although it is too soon to call it worrisome.

The longer Bitcoin remains above $24,000, the more comfortable those pro traders become with the current rally. Moreover, bears using futures markets had $235 million liquidated between Jan. 15 and Jan. 16, resulting in a decreasing appetite for bearish bets. Hence, the derivatives markets continue to favor bullish momentum.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

FTX’s $5.5 Billion in Alleged ‘Liquid Assets’ Includes Locked SOL Cache and Illiquid FTT Holdings

January 19, 2023 Bitcoin.com

Alameda wallet under liquidator control incurred $11.5M in losses: Arkham

January 17, 2023 Coin Telegraph

Alameda wallet under liquidator control incurred .5M in losses: Arkham

Alameda Research

According to crypto analytics firm Arkham, at least $4 million of these losses were "preventable losses."

The liquidators of Alameda Research have reportedly incurred at least $11.5 million in losses since taking control of Alameda's trading accounts.

On Jan. 16, a Twitter thread from Arkham Intelligence reported that one wallet under the control of liquidators has seen a string of "significant losses" due to liquidations, some of which were "preventable losses."

Over the past two weeks being under Liquidator control, the account incurred significant losses:

Largest single liquidation: $4.85M
Total liquidated amount: $11.5M
Preventable losses: $4M+
— Arkham (@ArkhamIntel) January 16, 2023

As one example, Arkham noted that the account ending 0x997 initially had a short position of 9,000 Ether (ETH) ($10.8 million) against the collateral of $20 million in USD Coin (USDC) and $4 million in Dai (DAI), with a net balance of $15.2 million when the liquidators first took control.

After a string of liquidations spanning almost two weeks however, the account's current value now stands at “$1.1M short Ether against $1.4M USDC: net balance of $300K.”

Arkham said this is the most recent development in a "series of market movements that have busted multiple Alameda positions left open after bankruptcy."

Another liquidation occurred when Alameda wallets removed $7 million in USDC and $4 million in DAI from the decentralized crypto lending platform AAVE to a separate Optimism L2 account on Dec. 29, around 30 hours after liquidators began moving assets out of Alameda wallets.

This removal of funds is believed to have placed the position at a high risk of liquidation, resulting in $11.4 million of USDC being sold off to liquidation bots on Optimism, while the AAVE Treasury took another $100,000 in USDC as liquidation tax.

Arkham explained that if liquidators had used a function to immediately close the position by selling off collateral instead of pulling collateral from the wallet, at least $15 million could have been preserved rather than the recovered $11 million.

This thus amounted to $4 million in preventable losses.

On Jan. 13, Cointelegraph reported that Alameda Research liquidators lost $72,000 in digital assets while consolidating funds into a single wallet on the decentralized finance (DeFi) lending platform Aave.

The liquidators attempted to close a borrow position but mistakenly removed extra collateral, putting the assets at risk of liquidation. Over a period of nine days, the loan was liquidated twice resulting in a total loss of 4.05 Wrapped Bitcoin (WBTC) which will not be able to be recouped by creditors.

Bitmex Co-Founder Criticizes Former FTX CEO for Not Liquidating Hedge Fund Alameda

January 14, 2023 Bitcoin.com

Bitcoin options data shows bulls aiming for $17K BTC price by Friday’s expiry

December 7, 2022 Coin Telegraph

Bitcoin options data shows bulls aiming for K BTC price by Friday’s expiry

Coin Telegraph

BTC bulls could secure a $130 million profit in the Dec. 9 options expiry, but bears aim to balance the scales by keeping Bitcoin price below $17,000.

Bitcoin (BTC) price crashed to $15,500 on Nov. 21, driving the price to its lowest level in two years. The 2-day-long correction totaled an 8% downtrend and wiped out $230 million worth of leverage long (buy) futures contracts.

The price move gave the false impression to bears that a sub-$15,500 expiry on the Dec. 9 options expiry was feasible, but those bets are unlikely to pay off as the deadline approaches.

Year-to-date, Bitcoin price is 65% down for 2022, but the leading cryptocurrency remains a top 30 global tradable asset class ahead of tech giants like Meta Platforms (META), Samsung (005930.KS), and Coca-Cola (KO).

Investors' main concern is still the possibility of a recession if the U.S. Federal Reserve raises rates for longer than expected. Proof of this comes from Dec. 2 data which showed that 263,000 jobs were created in November, signaling the Fed’s effort to slow the economy and bring down inflation remains a work in progress.

On Dec. 7, Wells Fargo director Azhar Iqbal wrote in a note to clients that "all told, financial indicators point to a recession on the horizon." Iqbal added, "taken together with the inverted yield curve, markets are clearly braced for a recession in 2023."

Bears were overly pessimistic and will suffer the consequences

The open interest for the Dec. 9 options expiry is $320 million, but the actual figure will be lower since bears were expecting sub-$15,500 price levels. These traders became overconfident after Bitcoin traded below $16,000 on Nov. 22.

*Bitcoin options aggregate open interest for Dec. 9. Source: CoinGlass*

The 1.19 call-to-put ratio reflects the imbalance between the $175 million call (buy) open interest and the $145 million put (sell) options. Currently, Bitcoin stands at $16,900, meaning most bearish bets will likely become worthless.

If Bitcoin's price remains near $17,000 at 8:00 am UTC on Dec. 9, only $16 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $16,500 or $15,500 is useless if BTC trades above that level on expiry.

Bulls aim for $18k to secure a $130 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Dec. 9 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $15,500 and $16,500: 200 calls vs. 2,100 puts. The net result favors the put (bear) instruments by $30 million.
Between $16,500 and $17,000: 1,700 calls vs. 1,500 puts. The net result is balanced between bears and bulls.
Between $17,000 and $18,000: 5,500 calls vs. 100 puts. The net result favors the call (bull) instruments by $100 million.
Between $18,000 and $18,500: 7,300 calls vs. 0 puts. Bulls completely dominate the expiry by profiting $130 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there's no easy way to estimate this effect.

Bulls probably have less margin to support the price

Bitcoin bulls need to push the price above $18,000 on Friday to secure a potential $130 million profit. On the other hand, the bears' best-case scenario requires a slight push below $16,500 to maximize their gains.

Bitcoin bulls just had $230 million leverage long positions liquidated in two days, so they might have less margin required to support the price.

Considering the negative pressure from traditional markets due to recession concerns and raising interest rates, bears will likely avoid a loss by keeping Bitcoin below $17,000 on Dec 9.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Document Claims Alameda CEO Caroline Ellison’s FTX Margin Position Was Negative $1.3B in May 2022

December 5, 2022 Bitcoin.com

Bitcoin options data shows sub-$17K BTC price gives bears a $200M payday on Friday

November 10, 2022 Coin Telegraph

Bitcoin options data shows sub-K BTC price gives bears a 0M payday on Friday

Coin Telegraph

BTC bears are set to profit from this week's $710 million options expiry, which could be used to add further sell pressure to Bitcoin price.

Bitcoin (BTC) crashed below $16,000 on Nov. 9, driving the price to its lowest level in two years. The 2-day correction totaled a 27% downtrend and wiped out $352 million worth of leverage long (buy) futures contracts.

To date, Bitcoin price is 65% down for 2022, but it's essential to compare its price action against the world's biggest tech companies. For instance, Meta Platforms (META) is down 70% year-to-date, and Snap Inc. (SNAP) has dropped 80%. Furthermore, CloudFare (NET) lost 71% in 2022, followed by Roblox Corporation (RBLX) and Snapchat (SNAP), both down 70%.

Inflationary pressure and fear of a global recession have driven investors away from riskier assets. This protective movement has caused the U.S. Treasuries' 5-year yield to reach 4.33% earlier in November, its highest level in 15 years. Investors demand a higher premium to hold government debt, signaling a lack of confidence in the Central Bank's ability to curb inflation.

Contagion risks from FTX and Alameda Research's insolvency are the most pressing issues. The trading group managed multiple cryptocurrency project funds and was the second-largest trading exchange for Bitcoin derivatives.

Bulls were overly optimistic and will suffer the consequences

The open interest for the Nov. 11 options expiry is $710 million, but the actual figure will be lower since bulls were ill-prepared for prices below $19,000. These traders were overconfident after Bitcoin sustained above $20,000 for almost two weeks.

*Bitcoin options aggregate open interest for Nov. 11. Source: CoinGlass*

The 0.83 call-to-put ratio reflects the imbalance between the $320 million call (buy) open interest and the $390 million put (sell) options. Currently, Bitcoin stands near $17,500, meaning most bullish bets will likely become worthless.

If Bitcoin's price remains below $18,000 at 8:00 am UTC on Nov. 11, only $45 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $18,000 or $19,000 is useless if BTC trades below that level on expiry.

Bears aim for sub-$17k to secure a $200 million profit

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Nov. 11 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $16,000 and $18,000: 1,300 calls vs. 12,900 puts. Bears dominate, profiting $200 million.
Between $18,000 and $19,000: 2,500 calls vs. 10,200 puts. The net result favors the put (bear) instruments by $140 million.
Between $19,000 and $20,000: 3,600 calls vs. 5,900 puts. The net result favors the put (bear) instruments by $40 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately, there's no easy way to estimate this effect.

Bulls probably have less margin to support the price

Bitcoin bulls need to push the price above $19,000 on Friday to avoid a potential $140 million loss. On the other hand, the bears' best-case scenario requires a slight push below $17,000 to maximize their gains.

Bitcoin bulls just had $352 million leverage long positions liquidated in two days, so they might have less margin required to support the price. In other words, bears have a head start to pin BTC below $17,000 ahead of the weekly options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Binance CEO not interested in Alameda’s offer to buy up its FTT holdings

November 8, 2022 Coin Telegraph

Alameda Research

CZ signaled that he isn’t interested in an offer from Alameda to buy out Binance’s FTX Tokens saying they’d rather “stay in the free market.”

Changpeng “CZ” Zhao, CEO of cryptocurrency exchange Binance, appears disinterested in Alameda Research’s offer to buy out the crypto exchange’s FTX Token (FTT) holdings.

Zhao responded to a question on Nov. 7 on Twitter asking if he would take up the offer by Alameda Research CEO Caroline Ellison to buy Binance’s FTT holdings for $22 per token. Zhao said: “I think we will stay in the free market.”

The offer from Ellison came after Zhao said Binance would be liquidating its FTT position due to “post-exit risk management” as part of “learning from LUNA,” on Nov. 6.

At the time, Zhao said he would try to sell the tokens in a way that “minimizes market impact” and said the token sales would take “a few months to complete” due to it holding around $2.1 billion United States dollar equivalent in the exchange’s stablecoin Binance USD (BUSD) and FTT.

Binance declined to comment on the matter.

Meanwhile, there have been concerns that rumors around Alameda’s finances, Binance’s impending FTT liquidation and Zhao’s comments could be the possible catalyst for major withdrawals from FTX, with reported data from Nansen showing $451 million worth of stablecoins leaving the exchange.

Users took to Twitter on Nov. 7 complaining of long wait times with FTX addressing the complaints, assuring users everything was running smoothly.

Bankman-Fried also pointed the finger at an unnamed “competitor” on Nov. 7, saying “a competitor is trying to go after the cryptocurrency exchange with false rumors.”

Zhao has reiterated that he’s not in a “fight” with FTX or Bankman-Fried, tweeting on Nov. 7, “I spend my energy building, not fighting” and attempted to dispel what he called “conspiracy theories” that he “somehow orchestrated this whole thing.”

Analysis by Cointelegraph on Nov. 7 pointed to a bearish pattern that could see FTT sink by 30% and early on Nov. 8, the FTT price dove to around $15.40 from $22 and is currently down 29.5% in 24 hours at the time of writing.

liquidation

Bitcoin margined longs entered the “FOMO” range

Options traders remain skeptical of a sustained rally

Bears were overly pessimistic and will suffer the consequences

Bulls aim for $18k to secure a $130 million profit

Bulls probably have less margin to support the price

Bulls were overly optimistic and will suffer the consequences

Bears aim for sub-$17k to secure a $200 million profit

Bulls probably have less margin to support the price

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